Oil prices dropped and stock markets surged following an announcement by Donald Trump suggesting an end to the conflict with Iran. The U.S. President stated that the Strait of Hormuz would be accessible to all if Tehran were to reach an agreement with Washington. Trump’s message on social media indicated that should Iran uphold its part of the potential agreement, the operation known as Epic Fury would conclude. This would lead to a cessation of the blockade, allowing free passage through the strategic waterway, including for Iranian vessels.
Despite the potential for diplomacy, Trump warned that if Iran failed to make a deal, military actions would resume with greater intensity. This statement came alongside Trump’s decision to temporarily halt “Project Freedom,” an initiative aimed at escorting ships through the critical strait, which has been under Iranian blockade since late February, contributing to a global energy crisis. Trump’s suspension of operations is intended to facilitate negotiations with Tehran, though the blockade on Iranian ports remains in effect. In response, Iran’s Revolutionary Guards’ Navy assured that safe passage through the strait would be guaranteed, marking their first public response since the U.S. pause.
Following these developments, Brent crude oil prices, which had spiked by 6% earlier in the week due to escalating tensions in the Middle East, plunged by 11%, reaching as low as $97 per barrel—the first dip below $100 since late April. Concurrently, wholesale gas prices saw declines, and airline stocks experienced a boost, reflecting optimism for improved international travel conditions. Expectations of a nearing agreement between the U.S. and Iran were fueled by reports that the White House was close to finalizing a memorandum of understanding to end the conflict, a claim supported by multiple U.S. officials.
However, as the day progressed, oil prices regained some ground, closing down 7.3% at $101.83 per barrel after Iran dismissed the notion of a deal as merely an “American wishlist.” While the specifics of Iran’s new procedures for the strait were not disclosed, the Revolutionary Guards acknowledged the cooperation of shipowners and captains in adhering to Iranian regulations.
The prospect of de-escalation in the region prompted European stock markets to climb. The UK’s FTSE 100 index rose by 2%, France’s Cac 40 increased by 3%, and Germany’s Dax saw a 2.1% uptick. Globally, the MSCI All-Country World Index hit new highs, along with its emerging markets benchmark and its broad Asia Pacific index, which saw gains of 2.5% outside Japan. The recent high in oil prices, reaching $126 per barrel last week, reflected uncertainties regarding the duration of the U.S. blockade and the stalled peace negotiations.